Key Iraqi oil refinery shuts down as Islamists press to seize it

By Mitchell Prothero - McClatchy Foreign Staff

June 17, 2014 02:14 PM

The oil refinery in the town of Baiji supplies at least 40 percent of Iraq’s gasoline production, making it one of the most crucial facilities in a country that, despite its oil wealth, must import gasoline to feed the foreign-made automobiles that have flooded Iraq since U.S.-led forces toppled Saddam Hussein in 2003.

But on Tuesday, the Iraqi government shut down the refinery after insurgents allied with the Islamic State of Iraq and Syria, who’ve controlled access to it since last week, fired mortars at the remaining security forces in the area.

The shutdown of the country’s largest refinery _ one of just three _ reinforced the now-widespread belief that the Shiite Muslim-led government of Prime Minister Nouri al Maliki has been unable to muster a response to the advance of ISIS and its Sunni Muslim allies, who include supporters of the late dictator Saddam Hussein.

Government officials have offered a series of public pronouncements that suggested the Iraqi army had been joined by Shiite militias and was now moving aggressively to block ISIS’s approach to Baghdad.

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Still, there were credible and detailed reports of ISIS hanging on to gains amid heavy fighting in Taji, just 20 miles from central Baghdad, and advancing in several neighborhoods of Baqouba, the capital of Diyala province, which is 40 miles from the capital _ less than an hour’s drive.

The shutdown of the refinery may be worse news. While Baiji is farther away from the capital _ it’s about 140 miles north _ the refinery’s importance had made most knowledgeable analysts of Iraq’s oil infrastructure think that neither side would take actions that would endanger it.

Speaking anonymously because of political sensitivities, a security official for the autonomous Kurdistan Regional Government in Irbil confirmed that the central government in Baghdad had ordered the facility offline after a series of mortar attacks on the few government soldiers who remain in the area.

An Iraqi engineer reached at the facility told the Reuters news service that foreign workers at the refinery had been evacuated. The nationalities of the fleeing foreign workers couldn’t be confirmed. A handful of Iraqi security forces remain at the facility.

The Baiji refinery recalls the situation that reigned in Libya during that country’s civil war in 2011. The refinery at the town of Brega, on the Mediterranean coast, was among the last government-held positions to surrender to the rebels, who hadn’t launched a direct attack to capture it because of fears that such an assault would cause tens of millions of dollars in difficult-to-repair damage _ or, even worse, set off an explosion and fire that would destroy the facility.

Generally, in times of such civil conflicts, refineries are treated like very large, delicate bombs.

With only three refineries, including a small one in Baghdad and one in Basra in the country’s south, Iraq must import as much as 25 percent of its daily gasoline needs. The Baiji facility is so crucial that oil industry analysts think that even if it’s lost to ISIS, the government probably would allow it to go back online. That’s how key many think its output of 400,000 barrels of gasoline a day _ nearly 21 million gallons _ is to the country.

“You can’t leave it offline for very long and can’t risk it getting damaged or destroyed,” said one expert who asked not to be named because of his dealings with the Baghdad government. “Even if ISIS controls it, the government will likely eventually have to allow it to go back online, because they need the gasoline for the economy despite ISIS making money off the output.”

The government wouldn’t have to deal directly with the rebels, the expert said, because “once the gas is in trucks and sent to a middleman, it’s impossible to determine where it came from and, frankly, nobody cares anymore.”

The collapse of much of Iraq’s northern population centers has been an economic and military boon to ISIS and its allies that transcends easy estimation.

The groups reportedly have taken control of Mosul’s banks _ including one of Iraq’s three central bank branches _ and tons upon tons of military equipment and supplies, including dozens of armored vehicles, many of which were supplied by the United States. Mosul was the economic center of northern Iraq, and conservative estimates of the value of the Iraqi and foreign currency, as well as gold bullion, that’s probably now in insurgent hands stretch to the hundreds of millions of dollars.

Getting the refinery online might represent additional tens of millions of dollars a day for the group, perhaps making it the wealthiest terrorist group in history.